Report: Intel Strikes Foundry Deal With Cisco

Intel has signed its biggest customer yet for its new foundry business.

According to a Bloomberg report, the world's largest chip maker will soon be making made-to-order processors for networking giant Cisco. The report, which cites two anonymous sources with knowledge of the agreement, states Intel will soon begin manufacturing processors for Cisco networking products.

Cisco already uses Intel chips in many of its products, but the new agreement will see Intel's foundry business manufacture custom processors designed by Cisco itself. Last year, Intel opened up its processor manufacturing operations to third parties, effectively shifting the company to a made-to-order chip-making business.

Intel has signed customer agreements with a handful of smaller companies so far, but the addition of Cisco would be a major win for the fledgling foundry business. Rumors have circulated in recent months about Intel courting Cisco, Apple and other major technology companies for its foundry business.

Intel has said in the past that it's not looking to compete with other made-to-order chip foundries like Taiwan Semiconductor Manufacturing Co. (TSMC), but the Cisco deal will likely put competitive heat on those chip manufacturers. In addition, Intel is currently cutting 22-nm processors and has already charted a course for 10-nm chips for 2015, which could give Intel a competitive edge against other chip manufacturers.

Intel is scheduled to report its fourth-quarter earnings Thursday afternoon.

Doron Kempel says selling hyper-convergence can be challenging for solution providers, but success will come from taking business from competitors that are unprepared or hesitant to embrace the technology.